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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI AMARJIT SINGH, JM
O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the above mentioned appeals against the different order passed by the Commissioner of Income Tax (Appeals)-17, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Ys. 2006-07 & 2013-14. ITA. NO.6931/M/2019
The assessee has filed the present appeal against the order dated 29.08.2019 passed by the Commissioner of Income Tax (Appeals)-17, & 6932/M/2019 A.Y. 206-07 & 2013-14 Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y. 2006-07.
The assessee has raised the following grounds: - 3.
“1. Under the facts and circumstances the learned CT (Appeals) erred in confirming the assessment order passed u/s. 143 (3) dated 26/12/2008 by the learned Dy. Commissioner of Income tax, Range 8 (2) Mumbai in Violation of the principles of natural Justice, determining the income at Rs.27789100/- against the declared income of Rs. 7616860/- 1 (a) The learned C1T (Appeals) as well as the learned Assessing officer failed to appreciate that :- i) The assessee should have knowledge of the material that is proposed to be used against him, in order to enable him to rebute it, no proper opportunity and / or show cause notice was given to the appellants before making the exorbitant additions. ii) Though it is mentioned in the assessment order, specific details were called, were not filed, but in fact no notice or proceedings asking for specific details were received by the appellants and no assessment proceedings were made by the learned Assessing officer. iii/ The learned CIT (Appeals) have based his order on the Remand Report dated 05/01/2018 prepared by Dy. CIT 10 (2) (1), which is without considering the details/explanation filed by the appellants vide letter dated 31/01/2018. 2) Under the facts and & 6932/M/2019 A.Y. 206-07 & 2013-14 circumstances of the case and in law, the learned CIT (Appeals) erred in confirming the disallowance of the Rill amount of fuel expenses of Rs. 9266241- by the learned Assessing officer.
2 (a) The learned CIT (Appeals) and the learned appreciate that Assessing officer failed to i) no proper opportunity was given to explain / rebute the issue. ii) the return is filed with audited statement of accounts.
Iii the details / explanations filed during Remand proceedings not considered.
3) Under the facts and circumstances and in law the learned CIT (Appeals) erred in confirming the disallowance of' the run amount of repair and maintenance of Rs. 5087434/- made by the learned Assessing officer.
3 (a) The learned CIT (Appeals) and the learned Assessing officer failed to appreciate that :- i) the return of income filed with audited statement of accounts and tax audit report. ii) no details / explanation were asked specifically; no proper opportunity was given to rebute the same. iii/ the details / explanation filed during Remand Proceedings not considered.
4) Under the facts and circumstances and in law the learned CIT (Appeals) erred in confirming the disallowance of the & 6932/M/2019 A.Y. 206-07 & 2013-14 remuneration of Rs. 660000/- (being Rs. 360000/- to Shri Arunkumar Muchhala and Rs. 300000/- to Smt. Ritika A. Muchhala.) made by the learned Assessing officer.
4 (a) The learned CIT (Appeals) and the learned Assessing officer failed to appreciate that:- i) Shri Arunkumar Muchhala who is the founder of the group and Smt. Ritika A. Muchhala who attends the operation of the group. ii) Individual return of income declaring the income from Directors remuneration have been filed and taxes have been paid. iii) No proper opportunity was given to file explanation / details. iv/ Details / explanation filed during Remand Proceedings not considered.
5 (a) The learned CIT (Appeals) as well as the learned Assessing officer failed to appreciate that:- i) return of income filed along with audited statement of accounts. ii) no proper opportunity was given to file specific details / supporting. iii/ Details / explanation filed during Remand proceedings not considered 6) Under the facts and circumstances and in law the learned CIT (Appeals) erred in confirming the disallowance a sum of Rs. 13129405/- out of cash deposited in Bank. & 6932/M/2019 A.Y. 206-07 & 2013-14 6 (a) The learned CIT (Appeals) failed to appreciate that:- i) the appellant company received cash from the customers, who visits the Water- Park and deposits the cash from time to time in the bank. ii) the return of income is filed along with audited statement of accounts and tax audit report as required by law. No proper opportunity was given to file the specific details / explanation. iv/ the details / explanation tiled during Remand Report not considered. v/ the addition are based on assumptions having no basis and / or corroborative evidences. 7) The Appellants crave leave to add, amend, alter, delete the ground/s of appeal at or before the hearing of appeal."
4. The brief facts of the case are that the assessee filed its return of income on 28.11.2006 declaring total income to the tune of Rs.76,16,860/- for the A.Y.2006-07. The return was processed u/s 143(1) of the I. T. Act. Subsequently, the case was selected for scrutiny. Notices u/s 143(2) & 142(1) of the I. T. Act, 1961 were issued and served upon the assessee. The assessee company was engaged in the business of running a water park under the name & style of M/s. Suraj Water Park. The assessee claimed the fuel expenses in sum of Rs.9,26,624/- which was disallowed on account of non-submission of sufficient evidence. The assessee also claimed Repair & Maintenance Expenses in sum of Rs.50,87,434/- which was also disallowed on account of non-submission of evidence. After some more disallowance, & 6932/M/2019 A.Y. 206-07 & 2013-14 the income of the assesse was assessed in sum of Rs.2,77,89,101/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who partly allowed the claim of the assessee but the assessee was not satisfied on the grounds mentioned above, therefore, the assessee has filed the present appeal before us. ISSUE NO.1
Issue no.1 is general in nature which nowhere required adjudication specifically. ISSUE NO.2
Under this issue the assessee has challenged the disallowance of fuel expenses in sum of Rs.9,26,624/-. It is argued by Ld. Representative of the assessee that the AO nowhere provide any opportunity before raising the addition, therefore, the addition is not justifiable. It is argued that the assessee is a running amusement park which cannot run without incurring expenditure on fuel which allows the machinery of various gadgets and rides to operate and the vouchers were also produced before the AO which lies at page no. 1 to 18 of the paper book but the AO failed to apply the mind, hence, disallowance is unjustifiable. However, on the other hand, the Ld. Representative of the revenue has refuted the said contentions. The paper book no. 2 and relevant page no. 1 to 18 perused. The details of fuel expenses have been mentioned in ledger account also which lies at page no. 1 to 4 of the paper book. Accordingly, the expenses have been shown to the tune of Rs.9,26,624/-. The vouchers/purchase bills have also been produced & 6932/M/2019 A.Y. 206-07 & 2013-14 by assessee which lies at page no. 5 to 18 of the paper book. The contention of the assessee is that the claim has duly been supported by ledger books as well as invoices/bills available on record but the claim of the assessee has not been allowed in accordance with law. Sufficient evidence is on the file. The documents relied by the Ld. Representative of the assessee was not discredited with speaking order. There is no plausible reason as to why the said expenses were not allowable. The CIT(A) disallowed the claim of the assessee on the basis of this fact that the assessee failed to produce the documents before the AO. But it is not the good reason to decline the claim because the assessee has under taking before us to the effect that all the documents were produced before the AO as well as CIT(A). However, the CIT(A) sought the remand report and the remand report speaks only about the submission of ledger but nowhere speak that the submission of bills which are on record. Any how the voucher/bills were produced before the AO. An another reason to decline the claim is that in the preceding year the fuel expenses were not allowed. It is not a good ground to decline the claim of the assessee. At least produced documents should be examined. No doubt the assessee submitted the undertaking before us in which the assessee claimed that the ledger as well as the vouchers/bills of petrol were produced before the AO which lies at page no.1 to 18 of the paper book no.2. The accounts were duly audited. The books of account were not rejected. It seems that the evidence given by assessee was not properly considered. No reasons were given to decline the claim. Taking into account have been available on record. We are of the view that the claim of the assessee has wrongly been declined which is infact liable to be examined. Accordingly, we set aside the finding of the CIT(A) on this issue & 6932/M/2019 A.Y. 206-07 & 2013-14 and restore the issue before the AO to decide the issue after giving an opportunity of being heard to the assessee in accordance with law. Accordingly, this issue is allowed for statistical purposes.
ISSUE NO.3
Issue no.3 is connection with the disallowance of Repair and Maintenance Expenses of Rs.50,87,434/-. The Ld. Representative of the assessee has argued that the assessee has furnished the ledger account before the AO and also furnished the necessary vouchers which lies at page no. 19 to 173 of the paper book no. 2 but the AO has wrongly declined the claim of the assessee and the CIT(A) has also wrongly confirmed the finding of the AO which is not justifiable, hence, the finding of the CIT(A) is liable to be set aside. It is also argued that the AO declined the claim of the assessee on account of this reason that the assessee purchased the marble & granite, plastering and flooring, aluminum sliding windows, new bathroom fitting, sand, bricks and grit powder, painting, filtration plant, air filter, ply wood etc. which were capital in nature but in fact the same was of revenue in nature. It is also argued that at the time of pendency of appeal before the CIT(A), the CIT(A) also sought the remand report in which the AO reported that the AO was unable to determine the nature of the expenses and requested to the CIT(A) to decide the case on merits but the CIT(A) dismissed the claim without any speaking order by relying upon the order of the AO as well as remand report wrongly an illigally. On appraisal of the record available with us, we found that the business of the & 6932/M/2019 A.Y. 206-07 & 2013-14 assessee had been started in the preceding assessment year of 2006-07. The assessee started its business in the preceding year in which fuel expenses has also been shown. Anyhow subsequently, the assessee expanded its business by repairing and maintenance of the water park. The AO nowhere concluded about this fact that the expenditure was capital in nature or revenue in nature. On seeing the facts and circumstances of the case, we find that in the case of amusement park, constantly repair and maintenance is required. The assessee submitted the ledger as well as bills on record which lies at page no. 14 to 173 of the paper book. At the time of arguments, the Ld. DR draw the attention towards this fact that the specific bills of vehicle were not found proper, hence, the claim was rightly rejected. Considering this specific fact of the present case, we are of the view that the claim of the assessee is liable to be verified at the end of the AO who certify the claim of the assessee in accordance with law. Needless to say that an opportunity to be heard is liable to be given in accordance with law. Accordingly, this issue is allowed for statistical purposes. ISSUE NO.4
Issue no. 4 is connection with the disallowance of Directors Remuneration in sum of Rs.660000/- paid to Shri Arunkumar Muchhala and Rs.300000 paid to Shri Ritika A. Muchhala. It is argued that the Directos of Shri Arunkumar Muchhala had conceived the idea of Suraj Water Park and had run it so successfully. It is also argued that he put his heart and soul in the project. He also gave the bank guarantee without & 6932/M/2019 A.Y. 206-07 & 2013-14 charging of any bank commission. Ritika Muchhala was also running cosmetic department of the park. She has also given bank guarantee without charging any bank commission. The Hon’ble ITAT has allowed the remuneration in the assessee’s own case bearing for the A.Y. 2009-10 dated 06.01.2017. There is no change and variation. The copy of order dated 06.01.2017 for the A.Y. 2009-10 is on the file in which the claim of remuneration has been allowed by the Hon’ble ITAT in the assessee’s own case. The Hon’ble ITAT has given the following finding as under.:-
“7. Next ground of appeal is about disallowance of remuneration paid to the directors. During the assessment proceedings, the AO found that the assessee had paid Rs.6 lakhs to one of the directors, namely Ritika Muchala(RM).He directed the assessee to explain as to why the remuneration paid to RM should not be disallowed for the reason that she had not rendered any service to the company.In its reply,the assessee submitted that RM was director of the company since inception and was actively involved in the day-to-day matter of the business activities, that she had declared the income and had paid tax thereon. The AO held that submission of the assessee was of general nature, that it was not based on documentary evidences, that it had not filed explanation regarding the educational qualification of the director and about the services rendered by her, that the onus was on the assessee to show that expenditure had been incurred wholly and exclusively for the & 6932/M/2019 A.Y. 206-07 & 2013-14 purpose of business. Finally, he disallowed the demolition paid to RM, amounting Rs. 6 lakhs.
7.1.Before the FAA, the assessee argued that RM was attending all day-to-day affairs of the company,that she had given personal guarantee to banks, that she had paid tax on the remuneration received from the company.Referring to the order of the FAA for the AY. 2008-09, he restricted the disallowance to Rs.3 lakhs.
7.2.Before us, the AR argued that remuneration paid to RM(Rs. 6 lakhs) was allowed by the Assessing Officer,while passing the order for the AY. 2011-12, that there was no basis to hold that RM was not providing services to the assessee. He referred to the pages 82 of the paper book. The DR supported the order of the AO and the FAA
7.3.We have heard the rival submissions and perused the material. We find that the AO had disallowed the entire remuneration paid to the director, that the FAA restricted it to 50%, that the director had offered the remuneration income in her individual return of income, that the return of the director was accepted by the Department, that the AO had not made any enquiry about the assertion made before the assessee before him, that it was claimed that she was attending the day-to-day affairs of the company and had stood as guarantor to the banks, that in the subsequent year the AO had allowed the remuneration (Rs. 6 lakhs) paid to her. Considering these facts we are of the opinion that there was no justification for & 6932/M/2019 A.Y. 206-07 & 2013-14 restricting the expenditure to Rs.3 lakhs. Reversing the order of the FAA, we decide ground number six in favour of the assessee.”
It is not justifiable that in one year the claim of the assessee has been allowed and in an another year the claim of the assessee has been disallowed. There should be some reason to decline the claim of the assessee. Moreover, we find that the assessee has shown these incomes in their return of income and offered the tax. Taking into account all the facts and circumstances and by honoring the decision of Hon’ble ITAT in the assessee’s own case (supra), we allowed the claim of the assessee. Accordingly, this issue is decided in favour of the assessee against the revenue. ISSUE NO.5
Under this issue the assessee has challenged the disallowance of Depreciation in sum of Rs.3,67,182/-. The Ld. Representative of the assessee has argued that the assessee has submitted the details of addition of fixed assets and all necessary documents were filed before the AO but the AO did not allow the depreciation in accordance with law. It is also argued that the vouchers were also produced before the AO which lies at page no. 19 to 173 of the paper book, hence, the claim of the assessee is liable to be allowed. However, on the other hand, the Ld. Representative of the revenue has refuted the said contention. Since basic contention of the assessee is that the claim of the assessee was not examined in view of the details of addition to the fix assets and no opportunity of being heard was & 6932/M/2019 A.Y. 206-07 & 2013-14 given to the assessee, therefore, we set aside the finding of the CIT(A) on this issue and restore the issue before the AO to examine the claim of the assessee in the light of the evidence adduced by the assessee. Needless to say that an opportunity of being heard is liable to be given to the assessee in accordance with law. Accordingly, this issue is this issue is allowed for statistical purposes. ISSUE NO.6
Issue no. 6 is in connection with the disallowance of cash deposit in sum of Rs.1,31,29,405/-. The Ld. Representative of the assessee has argued that the assessee company was receiving cash from the customers who were visiting in the water park and the assessee was depositing the cash in the bank time to time. The assessee also filed the audited account and tax audited report as required by law. It is also argued that the remand report was also filed by AO which was not also considered, therefore, the finding of the CIT(A) is not justifeable, hence, is liable to be set aside. The Ld. DR has refuted the said contention. The assessee is running amusement park with the name and style of Suraj Water Park. The assessee was receiving the cash by selling the tickets in cash for the entry in the park as well as for the different activity going on in the park. The assessee was depositing the cash on the same day and if not possible then on an another day. In such type of business certainly no amount was paid by cheque etc. However, in some cases payments can be accepted through credit card/debit card. The assessee has given a complete list of entry fees for the verification of the claim. In another assessment year such claim of assessee was not & 6932/M/2019 A.Y. 206-07 & 2013-14 disallowance which was not bothered to touch by the lower authority. The claim of the assessee was declined on the basis of surmises and conjectures which is not justifiable. In other years, the claim of the assessee was allowed. The AO nowhere brought into any other evidence to which it can be assumed that the cash was not belonging to the assessee or the same was unexplained. Taking into account all the facts and circumstances, we are of the view that the finding of the CIT(A) is not justifiable to decline the claim of Assessee, hence, we set aside the finding of CIT(A) in this regard, we ordered accordingly and allowed the claim of the assessee. Accordingly, this issue is decided in favour of the assessee against the revenue. In the result, the appeal of the assessee is hereby partly allowed for statistical purposes. ITA. NO.6932/M/2019
The assessee has filed the present appeal against the order dated 11.09.2019 passed by the Commissioner of Income Tax (Appeals)-17, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y. 2013-14. The assessee has raised the following grounds: - 13.
“I . Under the facts and circumstances and in law the learned CIT (Appeals) erred in confirming the disallowance of Rs. 40546020/- being payment to Forest Department out of commercial expediency and the same does not in any way contribute to the & 6932/M/2019 A.Y. 206-07 & 2013-14 acquisition of any capital assets, made by the learned Assessing officer.
I (a) The learned CIT (Appeals) as well as the learned Assessing officer failed to appreciate that i. the appellant company has not got any assets or capital rights. the appellants company has not violated any law for which penalty can be levied.
I (b) The learned CIT (Appeals) has concluded that the payment has actually been made for Land use to regularize unauthorized construction which cannot be allowed as revenue expense; whereas the appellants have not carried out any unauthorized construction as observed by the learned CIT (Appeals).
2/ Under the facts and circumstances the learned CIT (Appeals) erred in confirming the disallowance of Rs.800964/- out of Depreciation, which is based on disallowance made in A.Y. 2006- 07 for want of purchase bills of Fixed Assets.
3/ Under the facts and circumstances the learned CIT (Appeals) erred in confirming the addition of Rs. 188082/- made by the learned Assessing officer, on the basis of Form No. 26AS, the credit of TDS not allowed.
The appellant crave leave to add, amend, alter, delete the grounds of appeal at or before the hearing of appeal.”
The brief facts of the case are quite identical to the facts of the case as narrated above while deciding the appeal bearing ITA. No.6931/M/2019, & 6932/M/2019 A.Y. 206-07 & 2013-14 therefore there is no need to repeat the same. However, the figure is different. ISSUE NO.1
The assessee has challenged the disallowance of Rs.4,05,46,020/-. The Ld. Representative of the assessee has argued that the assessee paid the compensation to the Forest Department on account of the decision of Hon’ble Supreme Court but the AO has treated the claim as capital in nature, hence, the finding of the AO confirmed by the CIT(A) is not justifiable and is liable to be set aside. However, on the other hand, the Ld. Representative of the Department has refuted the said contention and argued that the compensation was given on account of land acquired by assessee, therefore, it is a capital in nature, hence, the finding of the CIT(A) is quite justifiable. With due regard to the arguments advanced by the Ld. Representative of the parties, we noticed that the assessee purchased the land from Smt. Hiragauri Shankarlal Vyas by virtue of sale-deed 24.11.1988 and the copy of sale-deed lies at page no. 60 to 71 of the paper book. The appellant was running an amusement park namely Suraj Water Park on the said land. The revenue record speaks about the ownership of the assessee. The assessee wanted to develop the land as Disney land. In the year 2002, the assessee took the necessary NOC to run the park. The assessee also took the no objection certificate from the Municipal Corporation of Thane and copy of which lies at page no. 73 of the paper book. In the year of 2006, the lands was treated as forest land under the Maharashtra Private Forest Acquisition Act, 1975. Some other land owners & 6932/M/2019 A.Y. 206-07 & 2013-14 in the area were also affected by the said order and they took the matter upto the Supreme Court and the Hon’ble Supreme Court constituted the Central Empowered Committee and under the decision of the committee, the appellant has to pay a sum of Rs.4,05,46,020/- to the Forest Department. In order to regularize the land and to continue its business, the assessee was under obligation make the payment. Non payment of the said amount will ruin the business. It is business exigency to make the payment. No new assets came into the existence. The said amount was paid in view of the order of the Hon’ble Supreme Court. The AO treated the said amount as capital in nature. The facts speak that at the time of purchase title of the assessee was clear and thereafter the assessee invested for the development of amusement park. The assessee also took the necessary permission from Municipal Corporation Thane in the year 2002. The defects came into notice on account of subsequent act of Forest Department. The compensation was paid in the A.Y. 2013-14 when the amusement park was running with its full swing. If the same was not paid then no doubt the business became closed. The paid amount has been shown as business expenditure. The AO admitted this fact that the amount paid was not for acquiring the new asset. Accordingly, in view of the decision of Hon’ble Supreme Court in the case of CIT Vs. Empire Jute Co. reported 124 ITR 01. The said expenses are liable to be treated to be paid for business expenses. Moreover disturbance on account of administrative act if any and payment accordingly is liable to be treated as revenue expenses in view of the decision in the case of 187 ITR 39 SC of Bikaner Gypsum Ltd. Vs. CIT. Accordingly, when the amount seems to be paid prima- facie for the business expediency, therefore, we are of the view that the said amount is & 6932/M/2019 A.Y. 206-07 & 2013-14 liable to be treated as revenue in nature. Accordingly, we set aside the finding of the CIT(A) on this issue and allow the claim of assessee. This issue is decided accordingly in favour of the assessee against the revenue. ISSUE NO.2
Under this issue the assessee has challenged the disallowance of Depreciation in sum of Rs.8,00,964/-. The assessee has furnished the necessary detail of plant and machinery in the A.Y. 2006-07. The payment was made through cheque which has been shown in the balance-sheet. The copy of balance-sheet lies at page no. 13 of the paper book-1 which speaks about the necessary details of equipment which was accepted by the auditors. It seems that the issue was not properly examined. We are of the view that the details of plant and machinery are required to be examined properly in the light of the evidence produced by the assessee and accordingly the claim of the depreciation is liable to be considered, therefore, we set aside the finding of the CIT(A) on this issue and restore the issue before the AO to decide the matter of controversy afresh by giving an opportunity of being heard to the assessee in accordance with law. ISSUE NO.3
Issue no.3 is in connection with the disallowance of claim of TDS in sum of Rs.1,88,082/-. The claim of the assessee is that the TDS was deducted at source from the income of the assessee and credit of the same was not given at the time of the assessment. The contention of the assessee is that no opportunity of being heard was given to the assessee, therefore, & 6932/M/2019 A.Y. 206-07 & 2013-14 opportunity of being heard is required to be given in the interest of justice. If the opportunity of being heard is not given to the assessee and its TDS claim was not set off, therefore, in the said circumstances, we are of the view that the finding of the CIT(A) is not justifiable, therefore, we set aside the same and restore the issue before the AO to decide the matter of controversy afresh by giving an opportunity of being heard to the assessee in accordance with law. Accordingly, this issue is decided in favour of the assessee against the revenue.